Finding Text
FINDING 2022-001 Procurement, Suspension and Debarment (Repeat Finding 2021-001) Federal Agency: Department of the Treasury Federal Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Criteria: The Department of the Treasury?s Interim Final Rule (Effective May 17, 2021 through March 31, 2022) and the Final Rule (Effective April 1, 2022) encouraged the use of internal Procurement Policies and Procedures when procuring products and/or services. The Department of the Treasury?s Compliance and Reporting Guidance report (Effective June 24, 2021 through April 30, 2025) required recipients (i.e., City of Evanston) to ensure any procurement using CSLFRF funds to be consistent with the procurement standards set forth in the Uniform Guidance at 2 CFR 200.317 through 2 CFR 200.327 as applicable. Procurement Standards of Title 2 of the Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards (Uniform Guidance) state that all non-federal entities will follow Section 200.318 through Section 200.327. A. Section 200.320 identifies four methods of procurement to be followed, among the methods of procurement the below are three identified thresholds: (a) Informal ? micro purchases (any amount up to $10,000) (b) Informal ? small purchases ($10,000.01 to $249,999.99) (c) Formal ? sealed bids ($250,000 and above) (d) Noncompetitive procurement B. The City of Evanston Purchasing Manual requires the collection of three written quotes for any purchase between $2,500 and $25,000 purchased with federal grant funds, a formal bid process (Bid, RFP, RFQ) for any purchase $25,000 or above purchased with federal grant funds, and a justification memo for a sole source purchase for any amount above $2,500 purchased with federal grant funds. C. The City of Evanston Purchasing Manual requires that for purchases above $2,500 but less than $10,000, approval signature must be obtained from the Department Director. All purchases above $10,000 require approval signature from the City Manager. Purchases above $25,000 must also be approved by the City Council. D. Per Title 2 CFR section 180.300, participant entering into a covered transaction must verify that the person with whom it intends to do business is not excluded or disqualified by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. E. Title 2 CFR section 200.303 states the following regarding internal control: ?The auditee shall maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with law, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs.? Condition/Context: 1. We tested nine purchase orders totaling $2,408,526. Our procedures revealed the following: a. Two (2) purchase orders in the amount of $27,739 and $150,525 respectively, were purchases greater than $25,000 each, and for which the City of Evanston did not complete a formal procurement process (competitively bid) following its own Purchasing Manual and/or obtain the required three quotations following Section 200.320 of Title 2 of the Code of Federal Regulations (CFR). b. For seven (7) purchase orders totaling $2,391,116, documentation demonstrating that suspension and debarment searches were performed could not be provided by the City of Evanston. c. For one (1) purchase order totaling $700,405, procurement documentation was not provided nor retained by the City of Evanston from third party procurement service provider. Cause: 1. The City of Evanston?s procurement policies do not include processes pertaining to monitoring and review procedures of procurement processes conducted by external procurement service providers to ensure compliance with all applicable procurement policies. 2. The City of Evanston?s procurement policies do not include processes pertaining to entity-wide suspension and debarment checks. 3. Where policies are in place for internal procurement they are not being followed. Effect: City of Evanston is not in compliance with Title 2 of the Code of Federal Regulations (CFR) Part 200 and the requirements outlined in the City of Evanston Purchasing Manual as it relates to purchases above $25,000. Additionally, the effect of noncompliance can result in questioned costs. Recommendation: We recommend that City of Evanston: a. Implement structures to monitor external procurement service providers to ensure their procurement methods comply with applicable federal compliance requirements. b. Further expand Purchasing Manual to include policies and procedures for suspension and debarment searches and retaining support for suspension and debarment check. c. Communicate and re-enforce its procurement policies and procedures to ensure compliance with applicable requirements. d. Centralize the procurement process to ensure all departments are following applicable procedures in a uniform manner. Views of Responsible Officials: The City of Evanston implemented a revised Purchasing Manual as of March 2023. We agree with the auditor?s recommendations and will further review and revise the Purchasing Manual and communicate and reinforce policies and procedures to all departments to ensure compliance with applicable requirements.